Getting Your Fair Share: The Divorce QDRO And You

If you and your spouse are divorcing, you want to ensure that the marital assets are divided fairly, and retirement funds are included with those assets. If your spouse has a 401(K) or another qualifying retirement account, you may be entitled to a portion of that fund balance as a result of your divorce. The funds are only disbursed using a very specific method known as the Qualified Domestic Relations Order (QDRO), so read on for what you need to know about getting your fair share:

Marital Assets

Just like the family home and cars, retirement funds are considered marital assets and should be included in with the rest of the marital property. While other marital property is divided and awarded using the marital settlement agreement (or final decree, depending on your state), the marital property held in a retirement account can only be disbursed using a QDRO. While some divorce agreements may make reference to the QDRO, this legal action can only be accomplished using documents and orders that are completely separate from the divorce decree.

Penalty Free

Under normal circumstances, taking money from these types of retirement funds would incur penalties, since the money is meant to be held until the account owner reaches retirement age. The QDRO has been created to allow parties to remove those funds without the penalties in some situations, and divorce is one of those situations. With this order, the funds are made available to the spouse, known as the "alternate payee", shortly after the divorce is final. Any funds placed into the account from the date of the marriage on is available for disbursement; funds deposited prior to the marriage are exempt.

What Else to Know

You may be wondering exactly how much you are entitled to get from your spouse's retirement plan using the QDRO. Since the retirement funds are considered part of your marital assets, the amount you get is more a result of you, your spouse and the family court judge's decisions than anyone else. The QDRO rules do not address how much can be disbursed; you can take the entire amount or any part of it and pay no penalty.

Another important issue to be aware of is taxes. The income you get as a result of the QDRO may come to you penalty-free, but you will still owe taxes on it since it's considered income by the IRS. You can, however, avoid paying those taxes by "rolling" the funds over into your own qualified retirement account.

Don't let your fair share pass you by, speak to your divorce attorney about your QDRO. Contact a law office like Gordon Liebmann Attorneys at Law for more information and assistance.